[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/pav/demwpp/demwp0203.html
   My bibliography  Save this paper

Foreign debt sustainability and human development in Sub Saharan Africa

Author

Listed:
  • Gianni Vaggi

    (University of Pavia)

  • Luca Frigerio

    (University of Pavia)

Abstract
Despite the debt relief initiatives at the turn of the century, the external debt of Africa is rising again with some new worrying features: diminishing concessionality, growing private component and a strong presence of opaque Chinese loans. Sub-Saharan countries devote a relevant portion of their fiscal resources to service the debt, this prevents them from increasing development expenditures. The 2020 Debt Service Suspension Initiative, DSSI, by the G20 recognizes these difficulties but it falls shorts from providing long term solutions. We evaluate external debt sustainability in four SSA countries: Cote D’Ivoire, Ethiopia, Ghana, and Kenya plus a composite country called Wakanda, representative of the whole region. We adopt a framework called geometry of Debt Sustainability, GDS, (Vaggi and Prizzon 2014) which focuses on some structural aspects of sustainability, in particular on the current account. We add a Human Development factor to the basic GDS model in order to evaluate how debt sustainability could change if these countries should improve spending on health and education. The results confirm a clear trade-off between debt service and human development expenditures. The model shows that even before the Covid-19 pandemic the four countries and Sub Saharan Africa were on unsustainable debt trajectories; the debt to GDP ratios would stabilize only at extremely high values. The results are coherent with the Debt Sustainability Analysis of the International Monetary Fund and the World Bank.

Suggested Citation

  • Gianni Vaggi & Luca Frigerio, 2021. "Foreign debt sustainability and human development in Sub Saharan Africa," DEM Working Papers Series 203, University of Pavia, Department of Economics and Management.
    • Handle: RePEc:pav:demwpp:demwp0203
    as

    Download full text from publisher

    File URL: http://dem-web.unipv.it/web/docs/dipeco/quad/ps/RePEc/pav/demwpp/DEMWP0203.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. berlage, Lodewijk & cassimon, Danny & dreze, Jacques & Reding, Paul, 2003. "Prospective Aid and Indebtedness Relief: A Proposal," World Development, Elsevier, vol. 31(10), pages 1635-1654, October.
    2. Breuer, Christian, 2017. "Expansionary Austerity and Reverse Causality," MPRA Paper 77556, University Library of Munich, Germany.
    3. Nancy Birdsall & John Williamson, 2002. "Delivering on Debt Relief: From IMF Gold to a New Aid Architecture," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 337, April.
    4. Bacha, Edmar L., 1990. "A three-gap model of foreign transfers and the GDP growth rate in developing countries," Journal of Development Economics, Elsevier, vol. 32(2), pages 279-296, April.
    5. Vitor Gaspar & David Amaglobeli & Mercedes Garcia-Escribano & Delphine Prady & Mauricio Soto, "undated". "Fiscal Policy and Development; Human, Social, and Physical Investments for the SDGs," IMF Staff Discussion Notes 18/09, International Monetary Fund.
    6. Vitor Gaspar & David Amaglobeli & Ms. Mercedes Garcia-Escribano & Delphine Prady & Mauricio Soto, 2019. "Fiscal Policy and Development: Human, Social, and Physical Investments for the SDGs," IMF Staff Discussion Notes 2019/003, International Monetary Fund.
    7. Cassimon, Danny & Essers, Dennis & Renard, Robrecht, 2009. "An assessment of debt-for-education swaps. Case studies on swap initiatives between Germany and Indonesia and between Spain and El Salvador," IOB Working Papers 2009.03, Universiteit Antwerpen, Institute of Development Policy (IOB).
    8. Vitor Gaspar & David Amaglobeli & Mercedes Garcia-Escribano & Delphine Prady & Mauricio Soto, 2019. "Fiscal Policy and Development; Human, Social, and Physical Investments for the SDGs," IMF Staff Discussion Notes 19/03, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Botta, Alberto & Spinola, Danilo & Yajima, Giuliano & Porcile, Gabriel, 2023. "Pasinetti, Debt Sustainability and (Green) Structural Change at the Time of Global Finance: An Emerging and Developing Countries’ Perspective," CAFE Working Papers 25, Centre for Accountancy, Finance and Economics (CAFE), Birmingham City Business School, Birmingham City University.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Moszoro Marian W., 2024. "The direct employment impact of public investment," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 60(1), pages 59-74, March.
    2. Matthew Stephenson & Mohammed Faiz Shaul Hamid & Augustine Peter & Karl P. Sauvant & Adnan Seric & Lucia Tajoli, 2021. "More and better investment now! How unlocking sustainable and digital investment flows can help achieve the SDGs," Journal of International Business Policy, Palgrave Macmillan, vol. 4(1), pages 152-165, March.
    3. Liebich, Lena & Nöh, Lukas & Rutkowski, Felix & Schwarz, Milena, 2020. "Current developments in green finance," Working Papers 05/2020, German Council of Economic Experts / Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung.
    4. Philippe Le Houérou & Hans Peter Lankes, 2023. "Mustering the private sector for development and climate in the Global South. Is it realistic? WP323," Working Papers hal-04123874, HAL.
    5. Vybhavi Balasundharam & Olivier Basdevant & Dalmacio Benicio & Andrew Ceber & Yujin Kim & Luca Mazzone & Hoda Selim & Yongzheng Yang, 2023. "Fiscal Consolidation: Taking Stock of Success Factors, Impact, and Design," IMF Working Papers 2023/063, International Monetary Fund.
    6. Judith M. Ament & Robin Freeman & Chris Carbone & Anna Vassall & Charlotte Watts, 2020. "An Empirical Analysis of Synergies and Tradeoffs between Sustainable Development Goals," Sustainability, MDPI, vol. 12(20), pages 1-12, October.
    7. Kazi Arif Uz Zaman, 2023. "Financing the SDGs: How Bangladesh May Reshape Its Strategies in the Post-COVID Era?," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(1), pages 51-84, February.
    8. Hannan, Swarnali Ahmed & Honjo, Keiko & Raissi, Mehdi, 2022. "Mexico needs a fiscal twist: Response to Covid-19 and beyond," International Economics, Elsevier, vol. 169(C), pages 175-190.
    9. AILINCA, Alina Georgeta, 2021. "Ways To Identify The Level Of The Public Debt Level Or Interval As Well As Possible In Accordance With The Achievement Of Sustainable Development Objectives At Eu27 Level," Journal of Financial and Monetary Economics, Centre of Financial and Monetary Research "Victor Slavescu", vol. 9(1), pages 6-22, October.
    10. Najib Rahman Sabory & Tomonobu Senjyu & Mir Sayed Shah Danish & Mikaeel Ahmadi & Hameedullah Zaheb & Mustafa Halim, 2021. "A Framework for Integration of Smart and Sustainable Energy Systems in Urban Planning Processes of Low-Income Developing Countries: Afghanistan Case," Sustainability, MDPI, vol. 13(15), pages 1-24, July.
    11. Cassimon, Danny & Vaessen, Jos, 2007. "Theory, practice and potential of debt for development swaps in the Asian and Pacific region," Economic Systems, Elsevier, vol. 31(1), pages 12-34, March.
    12. repec:unu:wpaper:wp2012-25 is not listed on IDEAS
    13. Omid Sabbaghi, 2024. "The United Nations Sustainable Development Goals and global finance: Recent evidence," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 31(5), pages 4020-4033, September.
    14. Kotsogiannis, Christos & Salvadori, Luca & Karangwa, John & Mukamana, Theonille, 2024. "Do tax audits have a dynamic impact? Evidence from corporate income tax administrative data," Journal of Development Economics, Elsevier, vol. 170(C).
    15. Cassimon, Denis & Moreno-Dodson, Blanca & Wodon, Quentin, 2008. "Debt Sustainability for Low-Income Countries: A Review of Standard and Alternative Concepts," MPRA Paper 11077, University Library of Munich, Germany.
    16. Sanjeev Gupta & João Tovar Jalles & Jianhong Liu, 2022. "Tax Buoyancy in Sub-Saharan Africa and its Determinants," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 29(4), pages 890-921, August.
    17. Mathias Lund Larsen, 2022. "Driving Global Convergence in Green Financial Policies: China as Policy Pioneer and the EU as Standard Setter," Global Policy, London School of Economics and Political Science, vol. 13(3), pages 358-370, June.
    18. Gravier-Rymaszewska, Joanna, 2012. "How Aid Supply Responds to Economic Crises: A Panel VAR Approach," WIDER Working Paper Series 025, World Institute for Development Economic Research (UNU-WIDER).
    19. Joanna Gravier-Rymaszewska, 2012. "How Aid Supply Responds to Economic Crises: A Panel VAR Approach," WIDER Working Paper Series wp-2012-025, World Institute for Development Economic Research (UNU-WIDER).
    20. Xinshen DIAO & Terry L. ROE & A. Erinç YELDAN, 1999. "How Fiscal Mismanagement May Impede Trade Reform: Lessons From An Intertemporal, Multi-Sector General Equilibrium Model For Turkey," The Developing Economies, Institute of Developing Economies, vol. 37(1), pages 59-88, March.
    21. Danny Cassimon & Dennis Essers & Karel Verbeke, 2015. "What to do after the clean slate? Post-relief public debt sustainability and management," BeFinD Working Papers 0103, University of Namur, Department of Economics.

    More about this item

    Keywords

    Debt relief; External debt sustainability; Development finance; Public Expenditure Allocation;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pav:demwpp:demwp0203. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Alice Albonico (email available below). General contact details of provider: https://edirc.repec.org/data/dppavit.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.